In High Spirits
strategy+business|Fall 2017

How to capitalize on the boom in craft liquors.

Akshat Dubey and Rakesh Mani
In High Spirits

In June 2017, alcohol giant Diageo announced it would pay up to US$1 billion to acquire Casamigos, a tequila company founded several years ago by, among others, actor George Clooney. The next month, the French spirits company Moët Hennessy acquired Woodinville Whiskey Company, a seven-year-old distillery brand based near Seattle.

The deals highlight the potential of a rapidly emerging niche in the consumer products world. Over the past two decades, upstart brands focused on innovative flavors, high-quality ingredients, and the cachet of authenticity have been disrupting some of the biggest segments of the U.S. food and beverage industry. In response to changing consumer tastes, particularly those of millennials, and with the use of modern digital and social media tools, “artisanal” and “craft” startups have garnered significant market share in categories as varied as snacking, chocolate, coffee, and beer. Now, this revolution is rolling through one of the oldest branded consumer products segments: spirits.

In recent years, spirits have been accounting for a larger share of alcohol drunk in the United States. Since 2002, spirits’ share of the number of drinks consumed in the U.S. climbed to 34 percent in 2015, with most of the growth coming at the expense of beer (see Exhibit 1 ).

Within the spirits segment, the premium tiers have accounted for the lion’s share of growth. And it is here, in the premium segment, where craft whiskeys, vodkas, gins, and other spirits have carved out a leading role. (A 750 ml bottle of Casamigos Tequila Blanco retails for about $45.)

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